Kemp: Goodbye Contango? Oil's Long March Towards Backwardation
But the pipeline of new non-OPEC non-shale projects is drying up as a result of investments cancelled or postponed since 2014.
The oil industry’s spare production capacity is shrinking and set to fall below 1.5 million bpd in 2018, mostly in Saudi Arabia.
Global oil inventories remain well above the five-year average, but given the fast growth in consumption the five-year average is likely to prove too low.
For all these reasons, oil prices are likely to move into backwardation again in 2018/19, just as they did during previous recoveries in 1999/2000, 2007/08 and 2013/14.
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